The past year for Home Consortium (ASX:HMC) investors has not been profitable
The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Home Consortium Limited (ASX:HMC) shareholders over the last year, as the share price declined 14%. That's well below the market decline of 3.0%. Because Home Consortium hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Home Consortium
Home Consortium wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Home Consortium grew its revenue by 91% over the last year. That's a strong result which is better than most other loss making companies. The share price drop of 14% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Home Consortium in this interactive graph of future profit estimates.
A Different Perspective
We doubt Home Consortium shareholders are happy with the loss of 12% over twelve months (even including dividends). That falls short of the market, which lost 3.0%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. It's worth noting that the last three months did the real damage, with a 14% decline. So it seems like some holders have been dumping the stock of late - and that's not bullish. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Home Consortium that you should be aware of.
Home Consortium is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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